How Wal-Mart plans to regain its edge

Here is an interesting summary of Wal-Mart’s corporate plans for the near future. The headline of the article says it all: “Wal-Mart, humbled king of retail, plots comeback.”

Three years ago, Wal-Mart ruled for convenience, selection and price. But today it is losing customers and revenue, and smarting from decisions that backfired.

Wal-Mart is not in danger of ceding its place atop the retail world. But competitors have begun to chip away at its dominance.

Over the last year, revenue at Wal-Mart stores open at least a year has fallen by an average 0.75 percent each quarter, according to the International Council of Shopping Centers. Revenue rose by an average of nearly 1.7 percent at Target, 8 percent at Costco and 5.9 percent at Family Dollar.

To fight back, Wal-Mart is again emphasizing low prices and adding back thousands of products it had culled in an overzealous bid to clean up stores. It’s also plotting an expansion into cities, even neighborhoods where others dare not go.

Even as the article talks about stagnant or slightly declining sales at existing stores plus some questionable decisions (like reducing the number of products on the shelves), the main issue seems to be perceptions. On the business side, Wal-Mart has been challenged, particularly on the lower end by dollar stores. But business has not tanked and Wal-Mart still thinks it has new markets to tap in the United States, particularly in urban areas. What do investors and shareholders think – is it just about stronger growth right now? On the public image side, stores like Target have offered an enticing alternative. And yet Wal-Mart has changed the layout and design of its stores to look more like Target and this seems to have helped. Ultimately, the article says Target’s revenues are still one-sixth of that of Wal-Mart.

It sounds like Wal-Mart thinks they need to make some changes. There is no guarantee that any business, even a behemoth like Wal-Mart, will continue to expand or even be profitable. And just by virtue of its size, Wal-Mart’s actions will continue to be scrutinized.

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